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Biotech / Medical : Xenogen (XGEN)

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To: tuck who wrote (33)	11/3/2005 6:03:02 PM
From: tuck	Read Replies (1) of 45

The CC as usual did not cover the legal situation. I'm going to have to pester the IR dept. on that issue. They actually raised guidance slightly. The shortfall appears to be from two sources. They didn't recognize revenue from a couple of systems. One was damaged in shipment, others pushed out for reasons known only to the customers. The other problem is rooted in the gene targeting contract at the N.J. subsidiary, Xenogen Biosystems. They didn't quite get some of these contracts completed during the quarter as expected, and had to recognize the expenses associated with them without being able to recognize any revenue from them. They expect to see noticeable improvement in gross margins 2nd quarter of next year, due chiefly to improvements previously alluded to regarding more efficient use of parts in the production of their imaging systems. Also system price increases -- the last one was in July -- will impact the top line in the fourth quarter as well as this past one. The reason for the delayed impact is the long sales lead time. Anyhow, the raising of guidance by a few million is a good sign, and will hopefully hold the share price. If they do not deliver a good 4th quarter, I will bail. Cheers, Tuck

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